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Hedge fund scorecard 2012: Mortgage masters win, Paulson on bottom again

Date: Tuesday, January 29, 2013
Author: Katya Wachtel, Reuters

Mortgage funds roared home with returns of almost 19 percent last year, trouncing all other hedge fund strategies and beating the S&P 500 stock index, which rose 13 percent.

BTG Pactual’s $245.5 million Distressed Mortgage Fund, which invests primarily in distressed non-agency Residential Mortgage-Backed Securities (RMBS), returned about 46 percent for the year, putting it at the top of HSBC Private Bank’s list of the Top 20 performing hedge funds and making it one of 2012′s best performing funds.  Bear in mind the the average hedge fund gained only 6 percent last year.

HSBC’s hedge fund platform features hundreds of funds, including many of the industry’s biggest and best known managers, and the bank releases regular performance updates throughout the year.

In fact the Brazilian bank claimed two spots on HSBC’s Top 20 list, with its Global Emerging Markets and Macro Fund gaining 28 percent. In a year-end note to investors in the distressed mortgage fund, which was reviewed by Reuters,  the portfolio manager said those returns “exceeded even the loftiest of our expectations.”

Like many of last year’s winners, that BTG fund is no behemoth in terms of assets.  (For more on the crop of smaller funds that bested many of the big brand name firms last year, see my colleague Svea Herbst-Bayliss’s story from last week.)

Rounding out HSBC’s Top 5 performers for 2012 were Josh Birnbaum’s $955 million Tilden Park Offshore Investment Fund, which returned about 41 percent; the $473 million Brookfield Global Real Estate Securities, returning 40 percent; a $1.5 billion CQS directional fund, which gained 36 percent; and Pine River’s $3.5 billion Fixed Income Fund, which rose about 35 percent.

Some of the industry’s best known managers made it into the Top 20, including Daniel Loeb’s Third Point Ultra Fund, which finished up the year with returns of about 35 percent, and David Tepper’s Palomino Fund, which rose more than 29 percent last year. Bill Ackman protege Mick McGuire also saw his Marcato International Fund in the Top 20, with gains of almost 20 percent. BTG Pactual and Pine River both had two different funds in the Top 20.

Perhaps the firm with the most to celebrate, however, is London-based Chenavari Investment Managers. Its $360 million Chenavari Toro Capital fund is the only portfolio that has appeared on HSBC’s Top 20 list three years running.

As for the loser list, John Paulson, once again, had at least two funds at the bottom of the HSBC pile at year-end. His Advantage Fund sank roughly 14 percent in 2012, and the levered version of that fund sank 21.5 percent. Those results come on top of Paulson’s massive losses in 2011, when the Advantage Plus fund famously lost more than 50 percent, putting the New York based investor at the top of HSBC’s loser list.

Paulson was not the worst performer on the HSBC platform last year though.  The Conquest Macro Fund plunged about 33 percent in 2012 and the RAB Special Situations Fund lost about 28 percent. Paulson’s Advantage Plus came in third. An improvement.